Retirement
Parents must be cautious when lending to their kids
Young Australians are increasingly turning to their parents to help them enter the property market, but the so-called ‘Bank of Mum and Dad’ needs to be cautious when lending to children.
Parents must be cautious when lending to their kids
Young Australians are increasingly turning to their parents to help them enter the property market, but the so-called ‘Bank of Mum and Dad’ needs to be cautious when lending to children.
Data from research company Digital Finance Analytics suggests the average amount lent by parents to their kids to help them buy property is more than $88,000 and that cumulatively, the amount lent by parents to their children in Australia is estimated to be at least $16 billion
Melissa Browne, a financial adviser and CEO of wealth and accounting firm A&TA, said parents need to “proceed with caution” if they choose to lend to their children, and suggested those who do wish to help their kids enter the increasingly expensive property market should think carefully about how they do so.
One way parents can help, Ms Browne said, is lending or gifting them the deposit they’ll need to purchase the property, and that some parents “may even opt to co-own” the property with their children.
Parents could also consider unlocking some of the equity in their own home or property to help finance this, but urged those parents to ensure their children understood the risk this would present before doing so.
“It is unhelpful to everyone concerned if you assist your children with a deposit and they subsequently find the mortgage repayments burdensome, so it’s important not to over-extend on borrowing and to make sure from the outset that the loan can be repaid at an interest rate of 8 per cent,” Ms Browne said.
“Then you will be in the strongest possible position to help your kids later, when they may really need your financial assistance”.
RELATED ARTICLES
Retirement Planning
Majority of Australians still unsure about their retirement prospects
A recent survey conducted by MFS Investment Management® has shed light on the ongoing uncertainty faced by many Australians regarding their retirement plans. Despite a slight increase in confidence ...Read more
Retirement Planning
Wage growth steadies as businesses navigate economic challenges
In a sign that the Australian labour market may be finding equilibrium, wage growth has stabilised this quarter, according to Employment Hero's latest data. This development comes as employers ...Read more
Retirement Planning
Simplified retirement advice: Key to overcoming behavioural biases, experts say
In a bid to enhance retirement outcomes for Australians, a recent whitepaper by Industry Fund Services, in collaboration with Challenger, has highlighted the importance of simplifying retirement ...Read more
Retirement Planning
Rest launches Retire Ready digital experience to empower members approaching retirement
Rest, one of Australia’s largest profit-to-member superannuation funds, has unveiled a new digital experience aimed at making retirement preparation simpler and more personalised for its members. Read more
Retirement Planning
New Framework Aims to Bridge Australia’s Financial Advice Gap
A ground-breaking framework introduced by the Actuaries Institute promises to revolutionise how Australians access financial support, potentially transforming the financial wellbeing of millionsRead more
Retirement Planning
The downsizer dividend: how Australia’s ageing shift will reshape property, finance and AI strategy
Downsizing is moving from a personal milestone to a system-level lever for Australia’s housing market. As policymakers court reforms and agents eye fresh listings, the real profit pools will accrue to ...Read more
Retirement Planning
Half of Australians financially insecure about retirement as AMP launches new initiative
In a significant move aimed at addressing the retirement concerns of Australians, AMP has unveiled the Retirement Confidence Pulse, a national barometer designed to gauge the financial confidence of ...Read more
Retirement Planning
North introduces Grow to expand Australia's financial advice footprint
In a bid to bridge the gap between the demand for financial advice and its accessibility, North, a prominent platform for superannuation and retirement in Australia, has launched an innovative ...Read more
Retirement Planning
Majority of Australians still unsure about their retirement prospects
A recent survey conducted by MFS Investment Management® has shed light on the ongoing uncertainty faced by many Australians regarding their retirement plans. Despite a slight increase in confidence ...Read more
Retirement Planning
Wage growth steadies as businesses navigate economic challenges
In a sign that the Australian labour market may be finding equilibrium, wage growth has stabilised this quarter, according to Employment Hero's latest data. This development comes as employers ...Read more
Retirement Planning
Simplified retirement advice: Key to overcoming behavioural biases, experts say
In a bid to enhance retirement outcomes for Australians, a recent whitepaper by Industry Fund Services, in collaboration with Challenger, has highlighted the importance of simplifying retirement ...Read more
Retirement Planning
Rest launches Retire Ready digital experience to empower members approaching retirement
Rest, one of Australia’s largest profit-to-member superannuation funds, has unveiled a new digital experience aimed at making retirement preparation simpler and more personalised for its members. Read more
Retirement Planning
New Framework Aims to Bridge Australia’s Financial Advice Gap
A ground-breaking framework introduced by the Actuaries Institute promises to revolutionise how Australians access financial support, potentially transforming the financial wellbeing of millionsRead more
Retirement Planning
The downsizer dividend: how Australia’s ageing shift will reshape property, finance and AI strategy
Downsizing is moving from a personal milestone to a system-level lever for Australia’s housing market. As policymakers court reforms and agents eye fresh listings, the real profit pools will accrue to ...Read more
Retirement Planning
Half of Australians financially insecure about retirement as AMP launches new initiative
In a significant move aimed at addressing the retirement concerns of Australians, AMP has unveiled the Retirement Confidence Pulse, a national barometer designed to gauge the financial confidence of ...Read more
Retirement Planning
North introduces Grow to expand Australia's financial advice footprint
In a bid to bridge the gap between the demand for financial advice and its accessibility, North, a prominent platform for superannuation and retirement in Australia, has launched an innovative ...Read more
